Unbundling Wealth: How DIY Super Is Reshaping Investment Flows In Australia

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Self-Managed Super Funds (SMSF) have long been a pillar of Australia's retirement savings system.

Today, they control over $1.01trn in assets, nearly a third of the nation's $3.9trn superannuation pool – a scale that makes them impossible to ignore.

By Lily Brown

The Quiet Revolution

The numbers paint a picture of sustained momentum. According to the ATO, there are 646,168 SMSFs and 1,197,293 members as of March 2025. With 30,531 new funds established between July 2024 and March 2025, this is a 26% year-on-year increase.

The average fund size is rising too – new SMSFs started in 2024 averaged $430,000, up from $410,000 in 2023.

For many trustees, control remains the defining appeal and one of the contributors of this growth. As SMSF Association CEO Peter Burgess notes,

“Business owners and primary producers have long held (their assets) in SMSFs—around $100bn worth”.

The Portfolio Transformation

The traditional SMSF portfolio is undergoing a structural shift. While listed shares still account for 26% of assets, maintaining their position as a core holding, the broader allocation mix tells a story of evolution and sophistication.

Cash and term deposits, once a bedrock of SMSF portfolios, have been in steady decline; cash has dropped from nearly 33% in 2013 to just 16% in 2025. This dramatic re-allocation speaks to changing market dynamics and evolving trustee confidence.

In their place, other segments are flourishing. Direct property has become a significant allocation: residential holdings stand at $59.2bn, commercial at $111.5bn. Limited Recourse Borrowing Arrangements (LRBAs) now total $73.6bn, demonstrating trustees’ willingness to leverage for returns.

This represents what analysts describe as a structural pivot. David Gallagher, Executive Director of Research at Rainmaker Information, observes:

“SMSFs over the past decade have also increasingly demonstrated their growing sophistication in executing their investment arrangements in an ever-competitive superannuation landscape”.

Younger entrants are further accelerating the change. New SMSF members are, on average, younger than their predecessors and display a greater comfort with alternative assets, reshaping the sector’s investment DNA.

The Rise of SMSF-Specific Products

The appetite for diversity has not gone unnoticed by the funds management industry. ETFs, in particular, have emerged as a cornerstone of modern SMSF portfolios.

Allocations among SMSFs have surged to 12% of assets, up from 9% in 2024, with 315,000 SMSFs now holding at least one ETF.

Fund managers are responding with tailored products of smaller parcel sizes, listed vehicles for liquidity, and yield-focused funds such as private credit strategies. These aren’t just repackaged retail products, but purpose-built solutions for the SMSF market.

Renae Smith, Vanguard Australia’s Chief of Personal Investor, captures the momentum:

“A growing number of Australian investors including SMSF trustees are adopting ETFs, while a high percentage of financial advisers are using ETFs as a core offering”.

Implications for Listed Markets

For decades, SMSF allocations into fully franked dividend payers underpinned demand for ASX blue chips; that dominance is waning. Listed shares now represent 26–27% of SMSF assets, down from previous highs, with capital flowing into new directions.

Diversification into ETFs, global equities, LICs and LITs is redirecting capital offshore and into alternative structures. Chris Hill, National Manager of Strategic Relationships at AUSIEX, notes:

“While traditional blue-chip stocks remain components of many portfolios, the growing emphasis on ETFs, both domestic and international, signals a shift towards diversification in the face of uncertainty”.

For listed companies, this means dividend policy alone may no longer be enough to secure SMSF capital.

Balance sheet quality and diversification will matter more in competing for the DIY dollar.

The Scrutiny Question: Advice, Risk and Regulation

While many trustees are sophisticated, not all are professional investors. The move into private credit and venture capital sharpens questions about capability and risk management.

Valuation, liquidity, and governance risks are inherently more demanding in private markets than in holding a basket of blue-chip shares.

The ATO remains wary of compliance gaps, with Deputy Commissioner Emma Rosenzweig cautioning:

“We expect a significantly higher proportion of non-lodgers have contravened the regulatory rules”.

That warning comes even as case studies abound of SMSF blow-ups; whether in crypto schemes, unregulated property developments, or scams leading to total capital loss.

These failures fuel recurring debates about whether minimum balance thresholds should apply and whether trustees are receiving quality advice as portfolios become more complex.

The Infrastructure and Policy Dimension

The sector is becoming more professional in response to these challenges.

A rising share of trustees rely on administrators and platforms such as Netwealth ((NWL)), Hub24 ((HUB)), and Praemium ((PPS)) to reduce operational burdens and manage reporting and compliance. These intermediaries, alongside product providers, are likely to be central beneficiaries as SMSFs diversify further.

This infrastructure evolution is enabling the sophistication that defines modern SMSFs, providing the tools and support structures that allow individual trustees to execute institutional-grade strategies.

The policy debate surrounding SMSFs remains contentious. As Burgess warns:

“To claim this tax only affects a minority and serves the national interest is shortsighted. It ignores the broader ripple effects”.

His point underscores a crucial reality: the SMSF sector is not just a niche for the wealthy. Its investment choices reflect across listed markets, property, private credit, and beyond.

The Road Ahead

Despite the risks and regulatory scrutiny, SMSFs remain firmly in growth mode. The 26% year-on-year increase in new fund establishments suggests the structural appeal of control, flexibility, and tax benefits continues to outweigh the complexity.

As Australia’s investment landscape evolves, understanding where that trillion dollars of DIY super is flowing has never been more important for investors.

In an era of institutional dominance, these self-directed investors represent something unique: individual agency at scale, with the collective power to move markets and reshape the investment landscape.

SMSFs are no longer passive participants but active shapers of market dynamics, and their choices today will echo through Australian markets for decades to come.

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